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CityCenter May Go Bankrupt by the Weekend

by Hillary LaClair, Senior Editor
March 25, 2009

The Las Vegas CityCenter casino and resort project, labeled by parent company MGM Mirage as the most expensive commercial development in U.S. history, may end in bankruptcy as early as the weekend, nine months before the center is scheduled to open its doors. The “city within a city,” developed by eight award-winning architects and allowing visitors to live, work and play on its grounds, is yet another example of the declining land casino market during the economic recession as compared to its online casino counterparts. It follows Harrah’s entertainment, an immensely popular casino brand, on the road to financial ruin.

The bankruptcy may be the result of a lawsuit involving MGM Mirage that took place earlier this week, wherein its joint-venture partner, Dubai World, alleged that the casino company had improperly managed the 76-acre development plan for the project, and substantially increasing the cost. The initial estimated cost of the CityCenter was pegged at $7.5 billion, but reports from the Las Vegas Sun say that the cost has risen to $8.7. Another report from the Review Journal states that the cost has risen to $9.1 billion. The partners are reportedly forced to make a $220 million payment on CityCenter.

Alan Feldman, and MGM spokesperson told VegasHappensHere.com, “The safest apples-to-apples would be our previously stated $9.2b less the just announced $600 million in savings.” He later told the news source, “The Sun is correct. $8.7 total, $1.2 of which we are hoping to finance.”

“When completed in 2009, CityCenter will be one of the great urban places of the world, a reflection of the best of the life that we’re living today and tomorrow,” reads a description of the buildings on the website. “It will be a place of continual evolution, richness and diversity – a place people from around the world will desire to visit and experience.

“Across the country and throughout the world, people are rediscovering the excitement of the city. The city is where the people are, where the action is, and where all that’s thrilling and new comes together – whoever you are. Las Vegas will soon have its own urban core – a 76-acre city-within-a-city that’s destined to redefine the skyline.”

While MGM Mirage said in a statement that despite the lawsuit with Dubai World, the company was ready and willing to complete the center and the multi-million dollar payment, the Wall Street Journal said that lenders will not allow the casino operator to make its payment for the building unless Dubai World makes an additional contribution. If the company which has stated that it has concerns about the project’s viability does not make its contribution, CityCenter will be forced to file a Chapter 11 bankruptcy reorganization as soon as the weekend. MGM said in a press release that the lawsuit was “completely without merit.”

CityCenter has already been in the process of hiring some 10,000 full time employees and has accepted over 90,000 applications. “We’re concerned about the jobs, but we don’t have any insight or details over what may or may not be going on over there,” said city council spokesperson, Steve Redlinger. “Rather than concentrate on what we don’t know, we’re going to concentrate on what we do know and that is (this) morning our workers are going to be back on the job building that project. If there is {sic} other plans in the future, we’ll deal with those once they become known.”